Nature of market segmentation

The total market for most types of products is too varied – too heterogeneous - to be considered a single, uniform entity. To speak of the market for vitamin pills or electric razors or education is to ignore the fact that the total market for each good or service consists of submarkets that differ significantly from one another. This lack of uniformity may be traced to differences in buying habits, in ways in which the good or service is used, in motives for buying, or in other factors. Market segmentation takes these differences into account.
Pic /// Computer firms can develop more effective marketing programs by dividing their total market into meaningful segments.

Not all consumers want to wear the same type of clothing, use the same hair shampoo, or participate in the same recreational activities. Nor do all business firms want to buy the same kind of word processors or delivery trucks. At the same time a marketer usually cannot afford to tailor-make a different good or service for every single customer. Consequently market segmentation is the strategy that most marketers adopt as a compromise be­tween the extremes of one good or service for all and a different one for each customer. A major element in a company's success is its ability to select the most effective location on this segmentation spectrum between the two ex­tremes.

What Is Market Segmentation?
Market segmentation is the process of dividing the total heterogeneous market for a good or service into several segments, each of which tends to be homogeneous in all significant aspects. Management selects one or more of these market segments as the organization's target market. A separate mar­keting mix is developed for each segment or group of segments in this target market.

Market aggregation is the opposite of market segmentation. Market aggregation is the strategy whereby an organization treats its total market as a unit—that is, as one mass aggregate market whose parts are considered to be alike in all major respects. The organization then develops a single marketing mix to reach as many customers as possible in this aggregate market.

In the language of economic theory, in market aggregation the seller as­sumes there is a single demand curve for its product. In effect the product is assumed to have a broad market appeal. In contrast, in market segmentation the total market is viewed as a series of demand curves. Each one represents a separate market segment railing for a different product, promotional appeal, or other element in the marketing mix. (See Figure 4-1.) Thus, instead of speaking of one aggregate market for personal computers, this total market can be segmented into several submarkets. We then will have, for example, a college student market segment for personal computers. Other submarkets might consist of segments representing homemakers, professors, traveling executives, traveling sales people, or small businesses. Stated another way, in market segmentation we employ a "rifle" approach (separate programs, pin­pointed targets) in marketing activities. In contrast, market aggregation is a "shotgun" approach (one program, broad target).

FIGURE 4-1 Demand curves representing market aggregation and market segmentation. The object of aggregation is to fit the market to the product. Segmentation is an attempt to fit the product to the market.